exv4w27



 







EXHIBIT 4.27




Execution Copy




INSURANCE AGREEMENT




     INSURANCE AGREEMENT, dated November 30, 2005, between The Connecticut Water Company, (the
“Company”) and Financial Guaranty Insurance Company, a New York stock insurance company (“FGIC”).



     WHEREAS, pursuant to an Indenture of Trust, dated as of October 1, 2005 (the “Indenture”),
between Connecticut Development Authority (the “Issuer”) and U.S. Bank National Association as
trustee (the “Trustee”), the Issuer has issued $10,000,000 in aggregate principal amount of its
Water Facilities Revenue Bonds (The Connecticut Water Company Project – 2005A Series) (the
“Bonds”); and



     WHEREAS, the Company and the Issuer have entered into a Loan Agreement, dated as of October 1,
2005 (the “Loan Agreement”), pursuant to which the Company is obligated to make loan payments
sufficient to pay, among other items, debt service on the Bonds; and



     WHEREAS, FGIC has issued its Financial Guaranty Insurance Policy (the “Policy”), which insures
the scheduled payments of principal of and interest on the Bonds and payment of principal of and
interest on the Bonds upon a Determination of Taxability (as defined in the Indenture) as specified
in the Policy; and



     WHEREAS, the Company understands that FGIC expressly requires the delivery of this Agreement
as part of the consideration for the delivery by FGIC of the Policy;



     NOW, THEREFORE, in consideration of the premises and of the agreements herein contained and of
the execution and delivery of the Policy, the Company and FGIC agree as follows:



ARTICLE I

DEFINITIONS




     SECTION 1.01. Definitions. Except as otherwise expressly provided herein or unless the
context otherwise requires, the terms that are capitalized herein shall have the meanings specified
in the Indenture unless otherwise defined in Annex A hereto.



ARTICLE II

PREMIUM AND REIMBURSEMENT OBLIGATIONS

OF THE COMPANY




     SECTION 2.01. Premium. In consideration of FGIC’s agreeing to issue the Policy hereunder, the
Company hereby agrees to pay FGIC the Premium at the times and in the amounts provided in the
Commitment. To the extent that any such payment of the Premium is not paid when due, interest
shall accrue on such unpaid amount at a rate equal to the Effective Interest Rate.



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     SECTION 2.02. Reimbursement Obligation. The Company agrees to reimburse Financial Guaranty,
from any available funds, immediately and unconditionally upon demand, for any Policy Payment. To
the extent that any such payment due hereunder is not paid when due, interest shall accrue on such
unpaid amounts at a rate equal to the Effective Interest Rate. Following any such Policy Payment,
the payment by the Company of the amount of principal of and/or interest on the obligations in
respect of which such Policy Payment shall have been made shall satisfy and discharge, to the
extent thereof, the corresponding obligations of the Company under this Section 2.02.




     SECTION 2.03. Unconditional Obligation. The obligations of the Company hereunder are absolute
and unconditional and will be paid or performed strictly in accordance with this Agreement,
irrespective of:



     (a) any lack of validity or enforceability of, or any amendment or other modification of, or
waiver with respect to the Bonds, the Indenture, the Loan Agreement or any other bond financing
document;



     (b) any exchange, release or nonperfection of any security interest in property securing the
Bonds, the Indenture, the Loan Agreement or this Agreement or any obligations hereunder;



     (c) any circumstances that might otherwise constitute a defense available to, or discharge of,
the Company with respect to the Bonds, the Indenture, this Agreement or the Loan Agreement; or



     (d) whether or not the obligations under the Bonds, the Indenture, this Agreement or the Loan
Agreement are contingent or matured, disputed or undisputed, liquidated or unliquidated.



ARTICLE III

REPRESENTATIONS AND WARRANTIES




     SECTION 3.01. Representations and Warranties of the Company.



     The Company makes the following representations as the basis for its undertakings herein
contained:



     (a) The Company is a Connecticut corporation organized and existing under the laws of the
State of Connecticut and has the power to enter into and has duly authorized, by proper action, the
execution and delivery of this Agreement and the Loan Agreement (collectively, the “Company
Documents”).



     (b) Neither the execution and delivery of any Company Document, the consummation of the
transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms
and conditions hereof and thereof, conflicts with or results in a breach of any of the terms,
conditions or provisions of the Company’s organizational documents or of any material agreement or
instrument to which the Company is now a party or by which it is



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bound, or constitutes a default
(with due notice or the passage of time or both) under any of the foregoing, or results in the
creation or imposition of any prohibited lien, charge or encumbrance whatsoever upon any of the
property or assets of the Company under the terms of any material instrument or agreement to which
the Company is now a party or by which it is bound.



     (c) All certificates, approvals, permits and authorizations of applicable local governmental
agencies, the State of Connecticut and the federal government that are necessary (i) for the due
execution and delivery by the Company of, and the performance by the Company of its obligations
under, each Company Document and (ii) for the operation and use of the capital projects being
financed by the Bonds, in each case, have been obtained and continue in force, except, in the case
of clause (ii), for such certificates, approvals, permits and authorizations the failure of which
to obtain or to maintain in full force would not, individually or in the aggregate, materially and
adversely affect the financial condition, assets, properties or operation of the Company.



     (d) No event has occurred and no condition exists that would constitute an Event of Default
under the Loan Agreement or hereunder or to the Company’s knowledge the Indenture or that, with the
passing of time or with the giving of notice or both would become such an Event of Default.



     (e) The Company Documents have been executed and delivered by the Company and are the legal,
valid and binding obligations of the Company, enforceable against the Company in accordance with
its terms subject to laws with respect to bankruptcy and general principals of equity.



     (f) Except as disclosed in the Official Statement, dated October 28, 2005, delivered in
connection with the issuance of the Bonds, (i) there is no action, suit, proceeding or
investigation at law or in equity before or by any court or governmental agency or body pending or
to their knowledge threatened against or affecting the Company that seeks to restrain or enjoin the
issuance or delivery of the Bonds, or the collection of the payments to be made pursuant to the
Indenture, the Bonds or any Company Document or in any way contests or materially adversely affects
the validity of the Bonds, the Indenture or any Company Document or the resolutions of the Company
relating to the Bonds, or contests or affects the powers of the Company to enter into or perform
its obligations or consummate the transactions contemplated under any of the foregoing; and (ii)
the Company is not in default with respect to any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or other governmental authority.



     (g) The financial statements of Connecticut Water Service, Inc. and its consolidated
subsidiaries as at December 31, 2004 and September 30, 2005 contained in Connecticut Water Service,
Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004 as filed with the SEC on
March 30, 2005 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 as filed
with the SEC on November 9, 2005, respectively, present fairly in all material respects the
financial condition, results of operations and cash flows of Connecticut Water Service, Inc. and
have been prepared in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as otherwise



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noted therein). Since
September 30, 2005 been no material adverse change in the financial condition, assets, properties
or operation of Connecticut Water Service, Inc.



ARTICLE IV

COVENANTS




     SECTION 4.01. Consolidation, Merger and Transfer of Mortgaged Property.



     (a) Restructuring, Merger, Consolidation, Reorganization. The Company (or any
subsequent obligor on the Note) shall not merge, consolidate, restructure or reorganize with an
entity without the prior written consent of FGIC, provided, however, the Company (or any subsequent
obligor on the Note) may merge, consolidate, restructure or reorganize with an entity without the
prior written consent of FGIC either if (a) the Company (or any subsequent obligor on the Note)
continues to exist after such merger, consolidation, restructuring or reorganization and (i) the
Company (or any subsequent obligor on the Note) remains a public utility regulated by the
appropriate regulatory body and (ii) the Company (or any subsequent obligor on the Note) remains
obligated to FGIC with respect to, and to make payments with respect to, the Bonds, the Note and
the Loan Agreement or (b) the Company (or any subsequent obligor on the Note) is not the surviving
entity after such merger, consolidation, restructuring or reorganization and (i) the surviving
entity is a public utility regulated by the appropriate regulatory body and (ii) the surviving
entity fully assumes all obligations to FGIC with respect to, and to make payments with respect to,
the Bonds, the Note and the Loan Agreement. Notwithstanding the foregoing, if as a result of the
merger, consolidation, restructuring or reorganization of the Company (or any subsequent obligor on
the Note) with an entity without the prior written consent of FGIC the unenhanced rating on the
Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating
Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to
FGIC with respect to, and all payments under, the Note and the Loan Agreement must be paid in full
and the Bonds must be fully redeemed in accordance with the Indenture.



     (b) Sale of Assets. The Company (or any subsequent obligor on the Note) may sell or
otherwise dispose of its assets without the consent of FGIC, provided, however, if the Company (or
any subsequent obligor on the Note) sells or otherwise disposes of an aggregate of 20% or more of
its assets, based on historical book value of the assets sold as determined as of the date of the
issuance of the Bonds, without the prior written consent of FGIC, and as a result of such sale and
disposition, the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency
then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the
unenhanced Bonds, all obligations to FGIC with respect to, and all payments
under, the Note and the Loan Agreement must be paid in full and the Bonds must be fully
redeemed in accordance with the Indenture.



     (c) Upon the occurrence of an event specified in section 4.01 (a) or (b) the Company shall
deliver to FGIC a certificate of the president or any vice president and an opinion of counsel
acceptable to FGIC, each stating that such occurrence complies with this Section 4.01.



     (d) Upon the occurrence of an event specified in section 4.01 (a) or (b) the successor entity
formed by such occurrence shall succeed to, and be substituted for, and may exercise



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every right
and power of, the Company under this Agreement with the same effect as if such successor had been
named as the Company herein, and thereafter, the predecessor entity shall be relieved of all
obligations and covenants hereunder.



     SECTION 4.02. Restrictions on Liens and Sale and Leaseback Transactions.



     (a) For so long as the Bonds are outstanding and FGIC has fully performed all of its
obligations under the Policy, the Company will not, nor will it permit any Significant Subsidiary
to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a Lien on any
Principal Property (whether such Principal Property is now owned or hereafter acquired), unless the
Company provides that the Bonds will be equally and ratably secured with such secured Debt or (2)
incur or permit to exist any Attributable Debt in respect of Principal Property; provided, however,
that the foregoing restriction shall not apply to:




     (i) to the extent the Company or any Significant Subsidiary consolidates with, or
merges with or into, another entity, Liens on the property of such entity securing Debt in
existence on the date of such consolidation or merger, provided that such Debt and Liens
were not created or incurred in anticipation of such consolidation or merger and that such
Liens do not extend to cover any Principal Property;




     (ii) Liens existing on property hereafter acquired at the time of such acquisition, as
long as the Lien was not created or incurred in anticipation thereof and does not extend to
or cover any other Principal Property;




     (iii) Liens of any kind, including purchase money Liens, conditional sales agreements
or title retention agreements and similar agreements, upon any property acquired,
constructed, developed or improved by the Company or any Significant Subsidiary (whether
alone or in association with others) which do not exceed the cost or value of the property
acquired, constructed, developed or improved and which are created prior to, at the time of,
or within 12 months after such acquisition (or in the case of property constructed,
developed or improved, within 12 months after the completion of such construction,
development or improvement and commencement of full commercial operation of such property,
whichever is later) to secure or provide for the payment of any part of the purchase price
or cost thereof; provided that the Liens shall not extend to any Principal Property other
than the property so acquired, constructed, developed or improved;




     (iv) Liens in favor of the United States, any state or any foreign country or any
department, agency or instrumentality or political subdivision of any such jurisdiction to
secure payments pursuant to any contract or statute or to secure any indebtedness incurred
for the purpose of financing all or any part of the purchase price or cost of constructing
or improving the property subject to such Lien, including Liens related to governmental
obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue
Code or any successor section of the Internal Revenue Code;



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     (v) Liens in favor of the Company, one or more Significant Subsidiaries of the Company,
one or more wholly-owned Subsidiaries of the Company or any of the foregoing combination;
and




     (vi) replacements, extensions or renewals (or successive replacements, extensions or
renewals), in whole or in part, of any Lien, or of any agreement, referred to above in
clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt
secured thereby (to the extent that the amount of Debt secured by any such Lien is not
increased from the amount originally so secured, plus any premium, interest, fee or expenses
payable in connection with any replacements, refundings, refinancings, remarketings,
extensions or renewals); provided that such replacement, extension or renewal is limited to
all or a part of the same property (plus improvements thereon or additions or accessions
thereto) that secured the Lien replaced, extended or renewed.



     (b) Notwithstanding the restriction in subsection (a) of this Section 4.02, the Company or any
Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in
clauses (i) through (vi) of subsection (a) above on any Principal Property now or hereafter owned
without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or
permit to exist Attributable Debt in respect of Principal Property, in either case so long as the
aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of
all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (a) above
then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of
the Company, as determined by the Company as of a month end not more than 90 days prior to the
closing or consummation of the proposed transaction.



     (c) For purposes of determining compliance with this Section 4.02, in the event that any Lien
at any time meets the criteria of more than one of the categories described in clauses (i) through
(vi) above of Section 4.02(a), or is entitled to be created pursuant to Section 4.02(b), the
Company will be permitted to classify (and later reclassify) in whole or in part in its sole
discretion such Lien in any manner that complies with this Section 4.02.



     (d) For purposes of determining compliance with any Dollar-denominated restriction on the
incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount
of Debt denominated in a foreign currency will be calculated based on the relevant currency
exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first
committed, in the case of revolving credit Debt; provided that if such Debt is incurred to
refinance other Debt denominated in the same foreign currency, and such refinancing would cause the
applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, the Dollar-denominated
restriction will be deemed not to have been exceeded so long as the principal amount of the
refinancing Debt does not exceed the principal amount of the Debt being refinanced.
Notwithstanding any other provision of this Section 4.02, the maximum amount of Debt secured by
Liens on Principal Property that the Company or any Significant Subsidiary may incur pursuant to
this covenant will not be deemed to be exceeded solely as a result of fluctuations in the exchange
rate of currencies.



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     (e) Except as provided in Section 4.02 hereof, while there are any Bonds Outstanding or any
reimbursement obligations owed to FGIC, without the prior written consent of Financial Guaranty,
the Company will not permit, create, assume or suffer to be created or to exist any mortgage, lien,
security interest, or encumbrance of any kind, upon, or pledge of, any of the Company’s properties
of any character, including real, personal, tangible and intangible properties and revenues, now
owned or hereafter acquired, to secure any indebtedness without providing that the Bonds and the
reimbursement obligations hereunder have the same security.



     SECTION 4.03. Liquidity Facility. If at any time the Bonds are converted into a mode, other
than a long-term mode longer than five years or an auction mode, the Company shall provide a
Liquidity Facility to support the Bonds. The Liquidity Facility and the Liquidity Provider shall
satisfy the terms set forth in Annex B hereto or shall otherwise be subject to the prior written
approval of FGIC.



ARTICLE V

EVENTS OF DEFAULT; REMEDIES




     SECTION 5.01. Events of Default. The following events shall constitute Events of Default
hereunder:



     (a) The Company shall fail to pay to FGIC any amount payable under Section 2.02 or 7.01
hereof and such failure shall have continued for a period in excess of ten days after receipt by
the Company of written notice thereof;



     (b) Any representation or warranty made by the Company hereunder or under any other Company
Document or any statement in the application for the Policy or any written report, certificate,
financial statement or other instrument provided in connection with the Commitment, the Policy, or
any Company Document shall have been materially false at the time when made;



     (c) Except as otherwise provided in this Section 5.01, the Company shall fail to perform any
of its other obligations hereunder, provided that such failure continues for more than thirty days
after receipt by the Company of written notice of such failure to perform;



     (d) The Company shall (i) voluntarily commence any proceeding or file any petition seeking
relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy,
insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely
and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or
consent to the appointment of a receiver, paying agent, custodian, sequestrator or similar official
for the Company or for a substantial part of its property, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) become unable, admit in writing its inability or
fail generally to pay its debts as they become due; or



     (e) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in
a court of competent jurisdiction seeking (i) relief in respect of the Company, or of a substantial
part of its property, under the United States Bankruptcy Code or any other Federal,



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EXHIBIT
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state or
foreign bankruptcy, insolvency or similar law or (ii) the appointment of a receiver, paying agent,
custodian, sequestrator or similar official for the Company or for a substantial part of its
property; and such proceeding or petition shall continue undismissed for forty-five (45) days or an
order or decree approving or ordering any of the foregoing shall continue unstayed and in effect
for thirty (30) days.



     SECTION 5.02. Remedies. If an Event of Default shall occur and be continuing, then FGIC may
take whatever action at law or in equity may appear necessary or desirable, including, without
limitation, legal action for the specific performance of any covenant made by the Company herein
and any financing document and, to the extent applicable, the pursuit of remedies available under
the Bonds, and the Loan Agreement to collect the amounts then due under this Agreement, or to
enforce performance and observance of any obligation, agreement or covenant of the Company under
the Company Documents or under the Bonds. All rights and remedies of FGIC under this Section 5.02
are cumulative and the exercise of any one remedy does not preclude the exercise of one or more of
the other available remedies under the Company Documents, the Bonds, under the Indenture or any
other financing document, or now or hereafter existing at law or in equity. No delay or omission
to exercise any right or power accruing under the Company Documents, the Bonds, under the Indenture
or any other financing document, or otherwise, upon the happening of any event set forth in Section
5.01, shall impair any such right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often as may be deemed expedient.
In order to entitle FGIC to exercise any remedy reserved to FGIC in this Article, it shall not be
necessary to give any notice, other than such notice as may be required by this Article.



ARTICLE VI

SETTLEMENT




     Financial Guaranty shall have the exclusive right to decide and determine whether any claim,
liability, suit or judgment made or brought against Financial Guaranty on the Policy (a “Policy
Claim”), shall or shall not be paid, compromised, resisted, defended, tried or appealed, and
Financial Guaranty’s decision thereon, if made in good faith, shall be final and binding upon the
Company. An itemized statement of payments made by Financial Guaranty, certified by an officer of
Financial Guaranty, or the voucher or vouchers for such payments, shall be prima facie evidence of
the liability of the Company.



ARTICLE VII

MISCELLANEOUS




     SECTION 7.01. Reimbursement of Costs and Expenses; Payments Generally (a)


The Company shall pay or reimburse FGIC for any and all charges, fees, costs, and expenses
(including reasonable attorney’s fees) that FGIC may reasonably pay or incur in connection with the
following: (i) the administration, enforcement, defense, or preservation of any rights or security
hereunder or under any other transaction document; (ii) the pursuit of any remedies hereunder,
under any other transaction document, or otherwise afforded by law or equity, (iii) any amendment,
waiver, or other action hereunder or with respect to or related to any transaction document whether
or not executed or completed; (iv) the violation by the Company




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of any law, rule, or regulation or
any judgment, order or decree applicable to it; (v) any advances or payments made by FGIC to cure
defaults of the Company under the transaction documents; or (vi) any litigation or other dispute in
connection with this Agreement or any other transaction document, or the transactions contemplated
hereby or thereby, other than amounts resulting from the failure of the FGIC to honor its payment
obligations under the Policy. FGIC reserves the right to charge a reasonable fee as a condition to
executing any amendment, waiver, or consent proposed in respect of any transaction document. The
obligations of the Company to FGIC shall survive discharge and termination of the transaction
documents. The Company’s obligations under this Section 7.01 shall be unconditional and shall be
paid promptly upon receipt by the Company of demand therefor.




     (b) If any payment hereunder is specified to be made on a date that is not a Business Day,
then such payment shall be made on the Business Day next succeeding the date originally specified
for such payment.



     SECTION 7.02. Indemnification; Limitation of Liability. (a) In addition to any and all rights
of indemnification or any other rights of FGIC pursuant hereto or under law or equity or under any
financing document, the Company and any successors thereto agree to pay, and to protect, indemnify
and save harmless, FGIC and its officers, directors, shareholders, employees, and agents, from and
against any and all claims, losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or reasonable expenses, including, without limitation, reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs of investigations or
obligations whatsoever paid by FGIC (herein collectively referred to as “Liabilities”) of any
nature arising out of or relating to the transactions contemplated by the financing documents by
reason of:




     (i) any untrue statement or alleged untrue statement of a material fact contained in
the offering document or in any amendment or supplement thereto or arising out of or based
upon any omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except insofar as such
Liabilities arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information which describes FGIC in the offering document set
forth under the caption “Bond Insurance”, or in the financial statements of FGIC, including
any information in any amendment or supplement to the offering document furnished by FGIC in
writing expressly for use therein that amends or supplements such information;




     (ii) to the extent not covered by clause (i) above, any act or omission of the Company
in connection with the offering, issuance, sale or delivery of the Bonds other
than by reason of false or misleading information provided by FGIC in writing for
inclusion in the offering document as specified in clause (i) above or the allegation
thereof;




     (iii) the misfeasance or malfeasance of, or negligence or theft committed by, any
director, officer, employee or agent of any of the Company; and



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     (iv) any claim by any party other than the parties to be indemnified under this Section
7.02 arising out of any Event of Default under the Company Documents.



     (b) This indemnity provision shall survive the termination of this Agreement and shall survive
until the statute of limitations has run on any causes of action which arise from one of these
reasons and until all suits filed as a result thereof have been finally concluded. Any party which
proposes to assert the right to be indemnified under this Section 7.02 will promptly after receipt
of notice of commencement of any action, suit or proceeding against such party in respect of which
a claim is to be made against the Company under this Section 7.02, shall notify the Company of the
commencement of such action, suit or proceeding, enclosing a copy of all papers served. In case
any action, suit or proceeding, shall be brought against any indemnified party and it shall notify
the Company of the commencement thereof, the Company shall be entitled to participate in, and, to
the extent that it shall wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the Company to such indemnified party of its election so
to assume the defense thereof, the Company shall not be liable to such indemnified party for any
legal expenses other than reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified party shall have the
right to employ its counsel in any such action the defense of which is assumed by the Company in
accordance with the terms of this subsection (b), but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless the employment of counsel by such indemnified
party has been authorized by the Company, or unless there is a conflict of interest. The Company
shall not under any circumstances be liable for any settlement of any action or claim effected
without its prior written consent.



     SECTION 7.03. Exercise of Rights. No failure or delay on the part of FGIC to exercise any
right, power or privilege under this Agreement and no course of dealing between FGIC the Company or
any other party shall operate as a waiver of any such right, power or privilege, nor shall any
single or partial exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or remedies which FGIC
would otherwise have pursuant to law or equity. No notice to or demand on any party in any case
shall entitle such party to any other or further notice or demand in similar or other
circumstances, or constitute a waiver of the right of the other party to any other or further
action in any circumstances without notice or demand.



     SECTION 7.04. Amendment and Waiver. Any provision of this Agreement may be amended, waived,
supplemented, discharged or terminated only with the prior written consent of the Company and FGIC.
The Company hereby agrees that upon the written request of the Trustee,
Financial Guaranty may make or consent to issue any substitute for the Policy to cure any
ambiguity or formal defect or omission in such Policy which does not materially change the terms of
such Policy or adversely affect the rights of the Holders, and this Agreement shall apply to such
substituted Policy. Financial Guaranty agrees to deliver to the Company and to the company or
companies, if any, rating the Bonds, a copy of such substituted Policy.



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     SECTION 7.05. Payments. The payments due by the Company under the Note and the Loan
Agreement shall be structured such that moneys are deposited with the Bond Trustee five days in
advance of debt service payments on the Bonds Insured.



     SECTION 7.06. Successors and Assigns; Descriptive Headings. This Agreement shall bind, and
the benefits thereof shall inure to, the Company and FGIC and their respective successors and
assigns, so long as any Indenture is in full force and effect. Except pursuant to an event
specified in Article IV herein neither the Company nor FGIC may transfer or assign any or all of
its rights and obligations hereunder without the prior written consent of the other party hereto
and any such transfer or assignment without such written consent shall be void.



     The descriptive headings of the various provisions of this Agreement are inserted for
convenience of reference only and shall not be deemed to affect the meaning or construction of any
of the provisions hereof.



     SECTION 7.07. Waiver. The Company waives any defense that this Agreement was executed
subsequent to the date of the Policy, admitting and covenanting that such Policy was executed
pursuant to the Company’s request and in reliance on the Company’s promise to execute this
Agreement.



     SECTION 7.08. Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes any and all prior
agreements and understandings of the parties hereto with respect to the subject matter hereof,
including but not limited to the Commitment.



     SECTION 7.09. Notices, Requests, Demands. Except as otherwise expressly provided herein, all
written notices, requests, demands or other communications to or upon the respective parties hereto
shall be deemed to have been given or made when actually received, or in the case of telecopier
notice sent over a telecopier machine owned or operated by a party hereto, when sent, with
confirmation of receipt, addressed as specified below or at such other address as either of the
parties hereto may hereafter specify in writing to the other:



	 	 	 
	If to the Company:

	 	The Connecticut Water Company
	 

	 	93 West Main Street
	 

	 	Clinton, Connecticut 06413
	 

	 	Attention: Vice President – Finance
	 

	 	and Chief Financial Officer
	 

	 	Fax No.: 860-669-9326
	If to FGIC:
	 	 
	 
	 	 
	 

	 	Financial Guaranty Insurance Company
	 

	 	125 Park Avenue
	 

	 	New York, New York 10017
	 

	 	Attention: Manager, Global Utilities
	 

	 	Fax No.: 212-312-3093






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EXHIBIT
4.27




     SECTION 7.10. Survival of Representations and Warranties. All representations, warranties and
obligations contained herein shall survive the execution and delivery of this Agreement and the
Policy.



     SECTION 7.11. Governing Law. This Agreement and the rights and obligations of the parties
under this Agreement shall be governed by and construed and interpreted in accordance with the laws
of the State of New York.



     SECTION 7.12. Counterparts. This Agreement may be executed in any number of copies and by the
different parties hereto on the same or separate counterparts, each of which shall be deemed to be
an original instrument. Complete counterparts of this Agreement shall be lodged with the Company
and FGIC.



     SECTION 7.13. Severability. In the event any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate
or render unenforceable any other provision hereof.



     SECTION 7.14. Parties Interested Herein. Nothing in this Agreement expressed or implied is
intended or shall be construed to confer upon, or to give or grant to, any person or entity, other
than the Company and Financial Guaranty, any right, remedy or claim under or by reason of this
Agreement or any covenant, condition or stipulation hereof, and all covenants, stipulations,
promises and agreements in this Agreement contained by and on behalf of the Company shall be for
the sole and exclusive benefit of the Company and Financial Guaranty.



     SECTION 7.15. Term. This Agreement shall expire upon the later of (i) the expiration of the
Policy in accordance with the terms thereof, or (ii) the repayment in full to Financial Guaranty of
any amounts due and owing to it by the Company under this Agreement or the Policy.



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EXHIBIT
4.27



     IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to
be duly executed and delivered as of the date first above written.



	 	 	 	 	 	 	 
	 	 	THE CONNECTICUT WATER COMPANY
	 
	 	 	 	 	 	 
	 	 	By	 	/s/ David C. Benoit
	 	 	 	 	 
	 	 	 	 	Name: David C. Benoit
	 

	 	 	 	 	 	     Vice President – Finance and Chief
	 

	 	 	 	 	 	     Financial Officer
	 
	 	 	 	 	 	 
	 	 	FINANCIAL GUARANTY INSURANCE
	 	 	COMPANY
	 
	 	 	 	 	 	 
	 	 	By	 	/s/ Paul R. Morrison
	 	 	 	 	 
	 	 	 	 	Paul R. Morrison
	 	 	 	 	Managing Director, International and Global
	 	 	 	 	      Utilities






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EXHIBIT
4.27



ANNEX A

DEFINITIONS




     For all purposes of this Agreement, except as otherwise expressly provided herein or unless
the context otherwise requires, all capitalized terms used herein and not otherwise defined shall
have the same meaning as in the Indenture, and all other capitalized terms shall have the meaning
as set out below.



     “Agreement” means this Insurance Agreement.



     “Attributable Debt” in respect of a sale and leaseback transaction means, at the time of
determination, the present value of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction, including any period
for which such lease has been extended or may, at the option of the lessor, be extended. Such
present value shall be calculated using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with generally accepted accounting principles.



     “Bonds” has the meaning set forth in the first recital of this Agreement.



     “Commitment” means that certain letter, dated March 17, 2005 as amended on October 5, 2005 and
on November 18, 2005, between the Company and FGIC.



     “Company” has the meaning set forth in the first paragraph of this Agreement.



     “Company Documents” has the meaning set forth in Article III (a).



     “Debt” means (A) indebtedness of the Company or a Significant Subsidiary for borrowed money
evidenced by a bond, debenture, note or other written instrument or agreement by which the Company
or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by the
Company or a Significant Subsidiary of any such indebtedness of another Significant Subsidiary.
“Debt” does not include, among other things, (w) indebtedness of the Company or a Significant
Subsidiary under any installment sale or conditional sale agreement or any other agreement relating
to indebtedness for the deferred purchase price of property or services, or (x) any trade
obligation (including obligations under power or other commodity purchase agreements and any hedges
or derivatives associated therewith), or other obligations of the Company or a Significant
Subsidiary in the ordinary course of business, (y) obligations of the Company or a Significant
Subsidiary under any lease agreement (including any lease intended as security), whether or not
such obligations are required to be capitalized on the balance sheet of the Company or a
Significant Subsidiary under generally accepted accounting principles.



     “Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public and private debts.



     “Effective Interest Rate” means the lesser of the (i) the prime rate announced from time to
time by Citibank, N.A., or (ii) the maximum rate of interest permitted by then applicable law.



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EXHIBIT
4.27



     “Event of Default” shall mean the events of default set forth in Section 5.01 of this
Agreement.



     “Holder” or “Holders” means the Person in whose name a Bond is registered on the books kept
and maintained by the Trustee for registration and transfer of the Bonds.



     “Indenture” has the meaning set forth in the first recital of this Agreement.



     “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, or any successor
federal statute.



     “Lien” means any mortgage, deed of trust, pledge, security interest, encumbrance, easement,
lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind,
including, without limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, and any defect, irregularity, exception or limitation in record title or,
when the context so requires, any lien, claim or interest arising from any of the foregoing.



     “Loan Agreement” has the meaning set forth in the second recital of this Agreement.



     “Net Tangible Assets” means the total amount of the Company’s assets determined on a
consolidated basis in accordance with generally accepted accounting principles as of a date
determined pursuant to Section 4.02, less (i) the sum of the Company’s consolidated current
liabilities determined in accordance with generally accepted accounting principles, and (ii) the
amount of the Company’s consolidated assets classified as intangible assets, determined in
accordance with generally accepted accounting principles, including, but not limited to, such items
as goodwill, trademarks, trade names, patents, and unamortized debt discount and expense and
regulatory assets carried as an asset on the Company’s consolidated balance sheet.



     “Policy Claim” has the meaning set forth in Article VI.



     “Policy Payment” means any payment by FGIC pursuant to the terms of the Policy.



     “Premium” means the premium described in the Commitment and payable by the Company to FGIC
pursuant to Section 2.01 hereof.



     “Principal Property” means any property of the Company or any Significant Subsidiary, as
applicable.



     “Significant Subsidiary” shall have the meaning specified in Rule 1-02(w) of Regulation S-X
under the Securities Act of 1933, as amended.



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EXHIBIT
4.27



ANNEX B


LIQUIDITY FACILITY REQUIREMENTS





	1.	 	Liquidity Provider Credit Ratings: The provider (the “Provider”) of a liquidity facility
(the “Facility”) to be used to pay the purchase price of tendered variable rate bonds (the
“Bonds”) shall be rated by both Moody’s Investors Service (“Moody’s”) and Standard & Poor’s
Ratings Services (“S&P”), and shall be of sufficient strength to cause the short-term ratings
for the Bond issue to be A-1+ by S&P and VMIG-1 by Moody’s. Financial Guaranty will not
deliver its bond insurance policy (the “Policy”) until such rating or ratings have been
released. Any Provider whose long-term rating drops below A- (S&P) or A3 (Moody’s) shall be
replaced at the request of Financial Guaranty.
	 
	2.	 	Initial Term of Facility: Minimum initial term of 364 days is acceptable so long as the
notice of non-renewal (Section 9 hereof) provides adequate time for the Issuer to find a
substitute facility and the authorizing document mechanics in the event of non-renewal provide
for the Bonds to be tendered and the Facility to be drawn upon before expiration of the
Facility.
	 
	3.	 	Renewals and Amendments: Any renewal on terms not identical to the terms of the initial (or
then renewing) Facility, or with a different Provider, shall be subject to the prior written
consent of Financial Guaranty. Financial Guaranty shall be provided with notice (and a copy)
of all Facility renewals, amendments and supplements.
	 
	4.	 	(a) Immediate Termination Events. Upon the occurrence of only the following events, the
Provider may terminate the Facility prior to the stated expiration date thereof without
offering Bondholders one last opportunity to tender the Bonds to the Provider for purchase:






	 	(i)	 	Policy Default. Failure by Financial Guaranty to pay
principal and interest when, as and in the amounts required under the Policy,
including interest at the “bank rate” due the Provider on disbursements under
the Facility if such amount is included as interest on the Bonds under the
terms of the Bonds;
	 
	 	(ii)	 	Payment Default Under Other Insurance. Any default by
Financial Guaranty in making payment when, as and in the amounts required to be
made pursuant to the express terms and provisions of any other municipal bond
insurance policy or surety bond issued by Financial Guaranty;
	 
	 	(iii)	 	Nullity of Policy. The Policy for any reason ceases
to be in full force and effect or is declared by a court of competent
jurisdiction to be null and void, or Financial Guaranty denies that it has any
further liability under the terms thereof; or
	 
	 	(iv)	 	Insolvency Proceeding Against Financial Guaranty. A
proceeding has been instituted in a court having jurisdiction in the premises
seeking an




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EXHIBIT
4.27




	 	 	 	order for relief, rehabilitation, reorganization, conservation, liquidation
or dissolution in respect of Financial Guaranty under the Insurance Law of
the State of New York or any successor provision thereto and such proceeding
is not terminated for a period of 60 consecutive days or such court enters
an order granting the relief sought in such proceeding.






	 	(b)	 	Termination Event Requiring “One Last Put” Opportunity. Upon the occurrence of
only the following events, the Provider may terminate the Facility prior to the stated
expiration date thereof but must provide Bondholders with one last opportunity to
tender their Bonds to the Provider for purchase prior to termination:






	 	(i)	 	The financial strength rating assigned to Financial Guaranty or
the rating assigned to securities insured by Financial Guaranty, as applicable,
is withdrawn, suspended or reduced to A, A2 or A, or below by any two of S&P,
Moody’s or Fitch, respectively.
	 
	 	(ii)	 	Failure of the Issuer to pay the Provider commitment fees for the Facility.






	 	(c)	 	No Other Termination Events. The only events permitting termination of the
Facility by the Provider prior to its stated expiration date are as specified in 4(a)
and 4(b) above. In particular, neither failure by the issuer to comply with any
covenants made by it in the Facility nor breach by the issuer of any representation or
warranty made by it in the Facility nor continuation of such failure or breach
following receipt by the issuer of notice thereof is a permissible event of
termination. The sole remedy allowed to the Provider upon such an event of default
shall be the ability to sue for specific performance.
	 
	 	(d)	 	Events Permitting Acceleration. Upon the occurrence of an event described in
4(a), the Provider may tender its Bonds to the issuer for immediate repurchase, and no
limitations shall be imposed on the exercise by the Provider of any remedies available
to it against the issuer (e.g., causing the issuer to accelerate its loan to the
ultimate borrower of Bond proceeds) should the issuer default on any such repurchase
obligation to the Provider.






	5.	 	Conditions to Effectiveness of Facility:






	 	(a)	 	As a condition to closing, Financial Guaranty may be required to provide its
customary enforceability and disclosure opinion with respect to the Policy.
	 
	 	(b)	 	As a condition to the issuance of the Policy, an opinion of counsel to the
Provider (including a separate opinion of foreign counsel in the case of a U.S. branch
of a foreign bank) regarding corporate matters, validity, enforceability and such other
matters as Financial Guaranty shall require, shall be addressed to (or shall be the
subject of a reliance letter addressed to) Financial Guaranty.




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EXHIBIT
4.27









	6.	 	Form of Liquidity Facility: Either a letter of credit or a standby bond purchase
agreement shall be acceptable.






	7.	 	Parity Payments: (Applicable for revenue bond issues) The Facility shall provide that only
the following amounts are payable on a parity with principal of and interest on the Bonds: (i)
the Provider’s periodic commitment fee and (ii) interest on the Bonds held by the Provider
calculated at the “provider rate.” All other amounts (e.g., “increased obligation of the
debtor enforceable in accordance with its terms costs,” uninsured “claw-back” amount, penalty
interest charges and indemnification amounts) shall be payable on a subordinated basis to
payment of principal and interest on the Bonds, replenishment of any debt service reserve fund
and payment of the fees of the trustee or paying agent for the Bonds (herein, the “Trustee”),
and both the Facility and the authorizing document for the Bonds shall specifically so
provide.
	 
	8.	 	Increased Costs: Any “increased costs” payable by the issuer pursuant to the Facility shall
be subordinated to the payment of principal and interest on the Bonds, replenishment of any
debt service reserve fund and payment of the fees of the Trustee, and the Facility shall
expressly so provide. The Facility shall limit “increased costs” to increases in costs to the
Provider or any participant of its obligations under the Facility as the result of the
imposition, increase or applicability of any reserve, special deposit, capital adequacy or
similar requirement against the obligations of the Provider or any participant under the
Facility (other than as a result of the acts, omissions or financial condition of the Provider
or such participant) due to any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authority charged with the
administration thereof.
	 
	9.	 	Notice of Non-Renewal: The Provider shall be required to give not less than 30 days’ notice
to the Trustee and Financial Guaranty before the Trustee under the authorizing document is
required to give Bondholders notification to tender Bonds as a result of a non-renewal
(“Non-Renewal Mandatory Tender”). (If the Trustee is required to send out a Mandatory Tender
Notice 30 days prior to the Facility termination, the Provider will be required to give the
Trustee notice of non-renewal 60 days prior to the expiration date of the Facility of its
intention not to renew or extend the Facility.) Early termination pursuant to paragraph 4(b)
above requires the same timing notification as described above. Early termination pursuant to
paragraph 4(a) above requires no prior notice.
	 
	10.	 	Certain Mandatory Conversions to Fixed Rate: The Trustee shall commence the process required
by the authorizing document to effect a mandatory conversion of the interest rate on the Bonds
to a fixed rate (sufficient to accomplish the complete remarketing at par of all Bonds then
held by the Provider) on or as soon as practicable after the termination date of the Facility,
in the case of a termination pursuant to paragraph 4(a) or 4(b) and a Non-Renewal Mandatory
Tender:
	 
	 	 	If such a remarketing cannot be effected, the Bonds shall continue to bear interest at the
variable rate and the remarketing agent shall attempt at least weekly to convert the Bonds
to a fixed interest rate sufficient to effect the remarketing at par of all Bonds then held
by the Provider.




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EXHIBIT
4.27









	11.	 	Holding Periods: For amortization periods of less than 5 years, no amortization shall be
permitted prior to the first anniversary of the date the tendered Bonds are purchased by the
Provider. For amortization periods of 5 years or more, no amortization shall be permitted
prior to 6 months from the date the tendered Bonds are purchased by the Provider. Whether
during the term of the Facility or subsequent to the termination thereof, the Provider shall
not be permitted to tender unremarketed Bonds to the issuer and shall be required to hold such
Bonds for the periods and in accordance with the conditions set forth above (except that no
holding period is required in the event of a termination of the Facility pursuant to 4(a)
hereof). Financial Guaranty shall pay only principal and interest on the Bonds as scheduled,
in accordance with the terms of the Policy, unless Financial Guaranty has provided, at the
request of the Provider, an endorsement to its Policy to cover a special mandatory redemption
under the authorizing document.
	 
	12.	 	Maximum Rates: The maximum rate payable for any interest payment period on the Bonds,
whether or not held by or pledged to the Provider at such time, shall be the lesser of 10% per
annum and the maximum rate permitted by applicable law (the “Cap Rate”).






B-4